World's Largest Asset Management Firm Sees Opportunity in Stakeholder Capitalism & Sustainability

G&A's Sustainability Highlights (02.01.2022)
Feb 3, 2022 12:30 PM ET
Newsletter

“I believe the de-carbonization of the global economy is going to create the greatest investment opportunity of our lifetime.” This bold prediction is part of the annual letter sent to CEOs of publicly-traded companies by CEO Larry Fink of BlackRock, the world’s largest asset management firm.

BlackRock manages US$10 trillion in assets (as of end of 2021), of which $500 billion is in sustainable investments. Each year CEO Fink sets out the firm’s “expectations” of the companies it owns and shares perspectives on investment trends for leaders in the corporate sector.

As explained by CEO Fink: “I write these letters as fiduciary for our clients who entrust us to manage their assets – to highlight the themes that I believe are vital to driving durable long-term returns and to helping them reach their goals.”

A major theme for 2022: “Stakeholder Capitalism”, which is not about politics, or a social or ideological agenda, and not about “woke”. “It is capitalism,” CEO Fink declares, “driven by mutually beneficial relationships between you [the corporate leader] and the employees, customers, suppliers, and communities your company relies on to prosper. This is the power of capitalism.”

In today’s globally interconnected world, the letter goes on, “a company must create value for and be valued by its full range of stakeholders to deliver long-term value for its shareholders.”

These messages further advance the corporate sector’s moving away from the long-term emphasis on “shareholder primacy” as advanced by business thought leaders such as Professor Milton Friedman five decades ago. This emphasis on increasing profits to drive higher shareholder returns was adopted by many corporate leaders as the primary driver of their strategies and actions.

In positioning “stakeholder capitalism,” the BlackRock CEO explains it is still about driving for profits: “Make no mistake, the fair pursuit of profit is still what animates markets; and long-term profitability is the measure by which markets will ultimately determine your company’s success.”

And in the drive for profits, “It’s never been more essential for CEOs to have a consistent voice, a clear purpose, a coherent strategy, a and a long-term view. Your company’s purpose is its north star in this tumultuous environment.”

Another important takeaway for members of boards and C-suite from BlackRock as influencer and thought leader: “We focus on sustainability not because we are environmentalists, but because we are capitalists and fiduciaries for our clients.”

There is much more for thoughtful consideration by corporate leaders in CEO Fink’s letter, and we’re sharing it today along with media coverage in our Top Stories.

This is just the introduction of G&A's Sustainability Highlights newsletter this week. Click here to view the full issue.